Ex-Carillion staff stage a protest outside the British Museum in London. The committee found that the CFO considered the company’s pension scheme a ‘waste of money’.
Photograph: Wiktor Szymanowicz/Rex/Shutterstock

A report into the collapse of Carillion by two parliamentary select committees has spread the blame liberally among the directors of the company, its auditors, the regulators and the government. Here are the key findings from the report:

Directors

Their report urged the government’s Insolvency Service, which is still trying to salvage jobs from the wreckage of Carillion, to consider whether directors breached their duties under the Companies Act.

If so, they could be recommended to the secretary of state for business for disqualification from company directorship. The report singled out three directors in particular.

Philip Green ‘appears to have interpreted his role as chairman as that of cheerleader-in-chief’ Photograph: Alamy

Former chief executive of United Utilities and senior executive at firms including Reuters, Saga and DHL. Chaired Prince Harry’s Lesotho-focused charity Sentebale and advised David Cameron on corporate responsibility.

What Carillion said: “Strong track record in corporate responsibility.”

What the report said:

“Mr Green appears to have interpreted his role as chairman as that of cheerleader-in-chief”.

“While the company’s senior executives were fired, Mr Green continued to insist that he was the man to lead a turnaround of the company as head of a ‘new leadership team’.

“As leader of the board he was both responsible and culpable”.

Q&A

What 'accounting tricks' did Carillion use?

Directors “used aggressive accounting policies to present a rosy picture to the markets", the MPs found. This resulted in the company admitting in July 2017 that £729m in revenue it had previously recognised (money the firm assumed would be coming in) would no longer be obtainable.

Here are some of the “accounting tricks” the report highlighted.

Peer review This involves independent assessment of whether managers are correctly calculating the value of contracts. A 2016 review of Carillion’s contract to build the Royal Liverpool Hospital – which remains delayed indefinitely – reported it was making a loss. Carillion’s management overrode it and insisted on a healthy profit margin being assumed, leading to a difference of £53m in assumptions.

Traded not certified Carillion was in the habit of saying it had banked revenue that actually it could not be certain of receiving from clients. In December 2016 it had recognised £294m of traded not certified revenue, more than 10% of construction revenue.

Early payment facility This scheme allowed Carillion’s suppliers to claim what they were owed by the company from a bank, receiving the money quickly in exchange for a small discount on the bill. The report found Carillion relied upon the EPF to delay paying out money, using it as a “credit card” and failing to account for it as borrowing. “The only cash supporting its profits was that banked by denying money to suppliers,” the report said.

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Government

The report makes clear that the directors were responsible for Carillion’s collapse and said the government did a “competent job in clearing up the mess”. However, it also said the government had “lacked the decisiveness or bravery” to tackle a culture of corporate recklessness.

Successive governments sought to outsource work on the cheap, a practice that “made such a collapse, if not inevitable, then at least a distinct possibility”.

“The government’s drive for cost savings can itself come at a price: the cheapest bid is not always the best”.

Report criticised the “semi-professional part-time system” under which a crown representative from the Cabinet Office oversees major government contractors in financial difficulty.

“The consequences of this are clear in the taxpayer being left to foot so much of the bill for the Carillion clean-up operation”.

Measures intended to protect small business suppliers to government contractors, such as the Prompt Payment Code, have been “wholly ineffective”.

Auditors

One of the most eye-catching suggestions in the report is that the big four auditors – KPMG, PwC, EY and Deloitte – be referred to the Competition and Markets Authority, which should consider whether they ought to be broken up forcibly. The quartet earned £72m from the company in 10 years and were described as a “cosy club incapable of providing the degree of independent challenge needed”.